ECONOMYNEXT – Sri Lanka’s state-run Ceylon Electricity Board will need another tariff hike to cut losses amid high fuel costs and cabinet approval have been sought for six monthly price revisions. Power and Energy Minister Kanchana Wijesekera said.
A tariff hike granted by the Public Utilities Commission in August was not enough to cover costs, and the agency is still making losses.
“When the CEB said it would cost 850 billion rupees a year to supply electricity based on the coal, diesel and furnace oil prices in April and revenue was only 250 billion rupees, the increase was only 250 billion rupees.
“Even that was not made on the increase in the cost of coal, and fuel. Last January a kilo of coal was 24 rupees. Now 114 rupees. Last January a litre of diesel was 139 rupees now it is 435 rupees.
“Furnace oil was close to 120 rupees, now it 320 rupees. This price increase was not made considering he 3 to 4 times increase in costs.
“Regardless of who opposed it, whoever becomes the line minister, whoever become the President of this country, whoever ran the administration, it is not possible to go forward without revising prices again.”
In 2023, where there is expected to be less rain than this year projected costs were 56.90 rupees a kilo Watt hour and current revenue was only 29.00 rupees a unit.
“There is a shortfall of 27.10 rupees a unit,” he said. “As a whole our generation cost will be 899 billion rupees, but we will get about 400 billion rupees. The CEB will have a 423 billion rupee loss.
“Nobody will give use coal free.”
“We went to cabinet last week asking for the Public Utilities Commission to make this change every January and July 2022.”
He said the steep price revision in 2022 was in party due to the failure of the PUCSL to raise tariffs for 9 years, raising questions about the usefulness of the regulator which had lost brought cost reflective prices.
“If after raising prices in January, costs fall in July due to renewables, then we can lower the price,” Minister Wijesekera said.
In Sri Lanka higher rainfall leads to a fall in costs.
He blamed the PUCSL partly for triggering the current crisis in the power sector by not raising prices for 9 years.
In 2022 however a part of the costs was due to procurement inefficiencies of fuel due to foreign exchange problems.
The key economic problem in post-independent Sri Lanka has been the soft-pegged central bank which have the country’s macro-economists to the power to print money to mis-target interest rates and create forex shortages and currency depreciation through flexible or discretionary policies.
The 2022 currency crisis the worst in its history, but the agency set up the style of Banco Central de la República Argentina in 1950 by US money doctor has busted the rupee from 4.70 to 360 to the US dollar so far.
Under an International Monetary Fund program, a new monetary law is to be enacted to legalize discretionary policies under ‘flexible inflation targeting’ which critics say is perhaps the most deadly impossible trinity monetary regime peddled to third world countries without a doctrinal foundation in sound money. (Colombo/Nov26/2022)